Anyone else think EUR/JPY can go to 130+

I just popped in to see a hedge fund this afternoon on beautiful Sydney harbour and this is what he is looking at (I hope he doesn’t mind me sharing!). He expects the longer-term EUR/JPY downtrend to reverse sharply sometime in the next few months on a break back above 108 approximately, which will take us back to at least 133. Quite a strong view and remember that most hedge funds (it’s a fairly small global community) know each other and talk with each other consistently, so they often have the very similar views/positions. It’s one thing to have a strong view and another thing entirely to trade it properly, but it’s good to know how some of the big speculators are thinking.

Well, I think so too. There is strong resistance near 108 and we may see a retracement back to 99-100 from 108. Once that reverses and heads back to 108, the picture becomes very bullish. The final target is around 132, the 50% Fibo of the big move on the weekly. Of course it won’t get there in a straight line and it will probably take a year. So this is an interesting insight but not really tradeable info.

Sean,
I just want to comment on the JPY story.
We all know that the natural trend for JPY is to strengthen over time. The BOJ is trying to give some life to the JPY bears by having some QE type of programs. Now new hopes are starting to inflate for a big QE on october 30th pushing JPY crosses higher.

My view: the debt to GDP ratio of Japan is tremendous at 200%. The yield on JGB is very low (0.8% on 10Y). Any significant money printing by the BOJ would cause inflationary pressures to rise, and bond yields to rise also. Any rise in bond yields will immediately make the debt servicing impossible. This is why Mr Shirakawa is so cautious about his money printing, and he’s injecting only minor sums of yen to avoid a debt spiral out of control. He’s printing on yearly basis what Bernanke is printing on a monthly basis.
This is why I think the markets will get disappointed again by the BOJ. The MOF is in the same trap. So yes they want to ease, to weaken the yen. But no, they can’t. What they’ll will do will be not enough. Things need to get much uglier before the USDJPY goes above 100 and EURJPY above 130 (if the Euro still exists by that time :-))

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